TIDMRNSM
RNS Number : 4598Y
Ransom(William) & Son PLC
22 December 2010
For Immediate Release 22 December 2010
WILLIAM RANSOM & SON PLC
("Ransom", "the Group" or "the Company")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
William Ransom & Son Plc, a natural healthcare Company,
today announces its unaudited interim results for the six months
ended 30 September 2010.
Highlights for the period:
-- Revenue of GBP13.1m (2009: GBP16m);
-- Reduction in UK Consumer Health division sales of GBP3m post
disposals;
-- GBP0.2m improvement in operating profit at Pharmaceuticals
division to GBP13,000 (2009: loss of GBP0.2m);
-- Natural Products division operating profit increased by
GBP0.4m to GBP0.4m operating profit (2009: loss GBP30,000);
-- Operating profit before exceptional items of GBP0.8m (2009:
GBP33 000). Overall operating profit of GBP0.4m (2009:loss
GBP2.7m);
-- Pre exceptional operating expenses reduced by 26% to GBP3.2m
(2009:GBP4.3m);
-- Underlying profit per share 0.77p (2009: loss 0.05p). Overall
profit per share 0.38p (2009:loss 3.27p);
-- Net bank debt reduced by GBP3.1m to GBP2.6m (2009:
GBP5.7m);
-- Secured three year financing agreement with KBC Business
Capital in April 2010;
-- Exited loss making operations in Italy in July 2010;
-- Fred Whitcomb appointed Chief Executive on 27 September;
and
-- Sir Roger Jones appointed as non-executive Chairman at
AGM.
Subsequent events - Scheme of arrangement
On 17 December 2010 the Company announced its intention to
change its corporate structure by introducing a new parent Company
as the holding company of the Company, to be effected by a scheme
of arrangement (the "Scheme"), and cancel the Company's admission
to trading on AIM. A circular setting out the details of the Scheme
and convening the shareholders meetings is being posted today in
conjunction with a more detailed announcement.
Sir Roger Jones, Non-executive Chairman of Ransom, commenting on
the interim results and outlook, said,
"The various initiatives highlighted in previous statements have
largely been implemented. However, whist some progress has been
made in operating profit, the improvement has not been derived from
sales increase but rather from cost savings and a significant
reduction in brand support. The outlook for the Company remains
extremely challenging".
For further information please contact:
William Ransom & Son plc +44 (0)1462 437615
Fred Whitcomb - Chief Executive
Buchanan Communications +44 (0)20 7466 5000
Charles Ryland / James Strong
Daniel Stewart & Company PLC +44 (0)20 7776 6550
Paul Shackleton and James Felix
Chairman's Statement
Results
In the six months to 30 September 2010, Group sales were
GBP13.1m (2009: GBP16m). Consumer Health Division sales fell by 29%
to GBP7.1m (2009: GBP10m) mainly due to brand disposals and current
market conditions. Selling and distribution costs have been reduced
by GBP1.3m to GBP1.4m (2009: GBP2.7m). Administrative costs before
exceptional costs increased by GBP0.15m to GBP1.75m (2009:
GBP1.6m).
The Group made an operating profit before exceptional costs of
GBP0.8m (2009: GBP33,000) and an overall operating profit of
GBP0.4m (2009: loss GBP2.7m including GBP2.5m goodwill impairment).
The losses in the Pharmaceutical Division were reduced by GBP0.2m
to a breakeven position (2009: loss GBP0.2m). The Natural Products
Division operating profit increased by GBP0.4m to GBP0.4m (2009:
loss GBP30,000).
Adjusted profit per share 0.77p (2009: loss 0.05p) and overall
profit per share was 0.38p (2009: loss 3.27p).
Net debt, consisting of a Bank loan, invoice discount facility,
overdraft less cash and cash equivalents, at 30 September 2010 was
reduced by GBP3.1m to GBP2.6m (2009: GBP5.7m).
Dividend
The Company is not in a position to pay a dividend at this
time.
Refinancing
On 9 April 2010 the Company underwent a refinancing with KBC
Business Capital which gave the Company some additional
headroom.
Board
Ivor Harrison decided to leave the Company and subsequently left
the Board of directors on 27 September. The Board appointed Fred
Whitcomb as Chief Executive in his place.
Fred Whitcomb was appointed to the Board as a non-executive
director on 14 June 2010. Fred was a founder of Optima with Steve
Quinn which Ransom acquired in 2005 and was an executive director
of the Company between June 2005 and December 2007. He remains a
significant shareholder of the Company with just under 14% of the
equity and since June 2008 has been a director of Dr Organic
limited a Company in which he is also a significant shareholder.
Having welcomed Fred back into the Company after his departure in
2007, the Board felt that his entrepreneurial drive will help grow
sales and develop new opportunities for Ransom, building on the
groundwork of his predecessor.
David Suddens served on the Board as a non-executive director
for three and a half years, the last three years as Chairman, and
Tim Bridge served for four and a half years. At the AGM I replaced
David Suddens as non-executive Chairman and on behalf of the Board
I would like to thank David and Tim for the invaluable support and
advice they have provided to the Board during their tenure.
It is the Director's intention to review the composition of the
Board to ensure that it is suitable for the status of the
Company.
Employees
I wish to thank all staff for their ongoing support and good
spirit in dealing with the challenges faced.
Scheme of arrangement
On 17 December 2010 the Company announced its intention to
change its corporate structure by introducing a new parent Company
as the holding company of the Company, to be effected by a scheme
of arrangement (the "Scheme"), and cancel the Company's admission
to trading on AIM. A circular setting out the details of the Scheme
and convening the shareholders meetings is being posted today in
conjunction with a more detailed announcement.
Outlook
Progress will be impossible to maintain if the UK Consumer
Health Division's sales continue to fall. Uncertainty also
continues to surround the Pharmaceutical Division's future
performance as more fully disclosed in note 2 to the accounts. The
management team are determined to mitigate falling sales and are
focused on engineering a recovery.
Sir Roger Jones, Chairman
22 December 2010
Chief Executive's Review
Implementation of the Strategy
The strategy remains largely unchanged to that of the previous
Board - to re-establish the Company's fortunes by returning to
being a leading branded natural healthcare Company with outsourced
manufacturing as follows:
1. Whilst working to improve the Company's performance we will
continue to evaluate the position of the Pharmaceutical
Division.
2. To halt the slide in UK Consumer Health Division's sales.
3. To recapture lost clients and markets.
4. To continue the overhaul of the supply chain and cost
cutting.
The market remains extremely challenging; the improvement in
financial performance has been achieved through cost cutting and a
major reduction in brand support. The objective remains to halt the
slide in sales and to build for the future notwithstanding a
reduction of marketing resources available. Following the
significant work invested in aligning the Company's cost base over
the last two years, it is the Board's key objective to halt the
sales reduction in the short term and increase the Company's sales
in the medium to long term.
Consumer Health Division
In the first half of the year, sales of consumer healthcare
products decreased by 29%, to GBP7.1m (2009: GBP10m). Of this,
GBP1.8m was due to the disposal of a number of brands in the last
quarter of the year ended March 2010.
The Consumer Health Division operating profit increased by
GBP2.7m to GBP1.5m (2009: loss GBP1.2m including GBP2.5m goodwill
impairment) despite the above mentioned reduction in sales. This
was achieved through continued costs reduction and implementation
of a number of supply chain initiatives.
On 12 July 2010 the Company's subsidiary Optima Italia S.r.l
("OIS") entered into an agreement to sell certain business assets
and liabilities to Optima Naturals S.r.l ("ONS"), a new Company to
be formed by the current manager of OIS, and appoint ONS as the
distributor of a range of the Company's products in Italy and other
territories.
The Company will receive total cash consideration of GBP45,000
for these assets which have a book value of approximately GBP6,000.
OIS generated annual sales of approximately GBP1.3m and achieved an
operating profit of approximately GBP70,000 for the year ended 31
March 2010.
Natural Products Division
The Natural Products Division traded well during the first half
of the year with third party sales up 11% on the same period last
year to GBP1.9m (2009: 1.7m). The combination of the sales increase
and the implementation of a number of margin enhancement
initiatives resulted in a GBP0.4m increase of operating profit
compared with the same period last year.
The Company continues to integrate the know-how of the Natural
Products Division into the Consumer Health Division and better
utilise the division's knowledge and expertise in order to further
expand the division's sales and operating results.
Pharmaceutical Division
Sales for the Pharmaceutical Division in the period decreased by
7% to GBP4.1m (2009: GBP4.4m) of which GBP0.8m relates to sales
decrease of Radian B to the purchaser of the brand post disposal in
December 2008. It is the intention of the purchaser to move the
above production out of the division in due course. In the period
the division returned to a breakeven position and made an operating
profit of GBP13,000 (2009: loss GBP0.2m).
The Pharmaceutical Division's ability to maintain a breakeven
position has had a material impact on the overall performance of
the Company and the Board is reviewing the division's current
performance and outlook on an ongoing basis.
Financial Review
Group revenue for the six months ended 30 September 2010
decreased by 18% to GBP13.1m (2009: GBP16m), as detailed above.
Like for like revenue excluding brand disposals and discontinued
lines decreased by 8%.
Selling and distribution costs decreased by 48% to GBP1.4m as a
result of actions taken to restructure the Company's consumer and
trade support spend in the period. Total administrative costs
decreased by GBP2.2m to GBP2.1m (2009: GBP4.3m) mostly as a result
of GBP2.5m goodwill impairment, (GBP0.15m increase excluding
exceptional items).
After carefully estimating the carrying value of goodwill at the
balance sheet date, the financial assumptions used and the present
value of the cash generating unit (Consumer Health Division), the
book value of goodwill was identified as representing the carrying
value of goodwill as at the balance sheet date.
The Group made an operating profit before exceptional costs of
GBP0.8m (2009: GBP33,000) and overall operating profit of GBP0.4m
(2009: loss GBP2.7m including GBP2.5m goodwill impairment). The
GBP3.1m improvement in the overall operating profit is primarily
the result of the GBP2.5m goodwill impairment recorded in the same
period last year, GBP1.3m reduction in sales and distribution
costs, GBP0.6m improvement in manufacturing divisions operating
results offset by the sales reduction in the Consumer Heath
Division after brand disposals.
On 9 April 2010 the Company agreed a three year financing
agreement with KBC Business Capital, the asset based lending
division of KBC Bank N.V. ("KBC"). The Company's existing debt
facilities were replaced by long term asset based facilities with
KBC comprising:
- Up to GBP3.5m invoice discount facility based on the Company's
eligible trade receivable position bearing an interest rate of base
plus 2%
- Up to GBP1.25m stock facility based on the Company's eligible
stock position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal
monthly payments commencing in May 2010 bearing an interest rate of
base plus 3%
As part of the above debt restructuring the Company agreed to
various operational and financial covenants measured on a monthly
basis in line with its forecast provided to KBC.
Net debt as at 30 September 2010 was GBP2.6m (2009:
GBP5.7m).
Net cash inflow from operating activities for the period was
GBP0.4m (2009: outflow GBP1.9m), of which GBP0.3m was a increase in
working capital (2009: GBP1.4m) primarily as a result of GBP0.8m
decrease in payables (2009: increase GBP0.7m).
Fred Whitcomb
Chief Executive
22 December 2010
Consolidated Interim Income Statement
For the six months ended 30 September 2010
Unaudited six months to 30 Unaudited six months to 30 Audited year ended 31 March
September 2010 September 2009 2010
Before
Before exceptional Before
exceptional Exceptional items Exceptional Total exceptional Exceptional
items items Total (Restated) items (Restated) items items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 13,094 - 13,094 16,021 - 16,021 30,231 - 30,231
Cost of sales (9,174) - (9,174) (11,681) - (11,681) (22,262) - (22,262)
__ __ __ __ __ __ __ __ __
Gross profit 3,920 - 3,920 4,340 - 4,340 7,969 - 7,969
Selling and
distribution
costs (1,414) - (1,414) (2,703) - (2,703) (5,210) - (5,210)
Administrative
expenses (1,752) - (1,752) (1,604) (2,477) (4,081) (3,219) (13,132) (16,351)
Reorganisation
expenses - (331) (331) - (245) (245) - (818) (818)
---------------- ------------ ------------ --------- ------------ ------------ ----------- ------------ ------------ ---------
Total
Administrative
expenses (1,752) (331) (2,083) (1,604) (2,722) (4,326) (3,219) (13,950) (17,169)
Gain on
disposal of
intangible
assets - - - - - - - 2,244 2,244
__ _ __ __ _ __ __ __ __
Operating
profit/(loss) 754 (331) 423 33 (2,722) (2,689) (460) (11,706) (12,166)
Finance costs (61) - (61) (123) - (123) (283) (102) (385)
__ __ __ __ __ __ __ __ __
Profit (loss)
before
taxation 693 (331) 362 (90) (2,722) (2,812) (743) (11,808) (12,551)
Taxation
(expense)/
credit (40) - (40) 46 - 46 (16) 332 316
__ __ __ __ __ __ __ __ __
Profit (loss)
from
continuing
operations
attributable
to equity
holders of the
parent 653 (331) 322 (44) (2,722) (2,766) (759) (11,476) (12,235)
__ __ __ __ __ __ __ __ __
Profit/(loss)
in earning per
share:
Basic
profit/(loss)
for the period
attributable
to ordinary
equity holders
of the parent 0.77 0.38 (0.05) (3.27) (0.90) (14.49)
Diluted
profit/(loss)
for the period
attributable
to ordinary
equity holders
of the parent 0.77 0.38 (0.05) (3.27) (0.90) (14.49)
Exceptional items are described more fully in Note 4.
Consolidated Interim Statement of Comprehensive Income
For the six months ended September 2010
Unaudited Unaudited Audited
Six months Six months Year ended
to 30 September to 30 September 31 March
2010 2009 2010
GBP'000 GBP'000 GBP'000
Profit (loss) for the
period 322 (2,766) (12,235)
_ __ _
Exchange adjustment on
foreign currency
retranslation (13) 3 (13)
_ __ _
Other comprehensive
income for the period,
net of tax (13) 3 (13)
_ __ _
Total comprehensive
income for the period,
net of tax 309 (2,763) (12,248)
Attributed to equity
holders of the parent 309 (2,763) (12,248)
Consolidated Interim Balance Sheet
At 30 September 2010
Unaudited Audited
30 September Unaudited 30 31 March
2010 September 2009 2010
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 2 ,435 4,534 2,799
Intangible assets:
Software 18 33 23
Goodwill (Note 7) 10,615 19,716 10,615
Other acquired
intangible assets 599 1,287 589
Long term deposit 151 - -
__ __ _
13,818 25,570 14,026
__ __ _
Current assets
Inventories 3,563 5,189 3,681
Trade and other receivables 5,966 7,918 6,243
Current tax asset - 14 -
Cash and cash equivalents 688 572 52
__ __ _
10,217 13,693 9,976
__ __ _
Total assets 24,035 39,263 24,002
Current liabilities
Trade and other payables 4,526 7,298 5,346
Bank overdraft and loans 193 732 186
Obligations under finance
leases 49 66 67
Invoice discount facility 2,756 3,856 2,566
Current tax liabilities 40 - -
Interest Rate Swap - 82 28
Provisions 178 54 94
__ __ _
7,742 12,088 8,287
__ __ _
Net current assets 2,475 1,605 1,689
__ __ _
Non-current liabilities
Bank loans 289 1,669 -
Deferred tax liabilities - 274 -
Obligations under finance
leases 90 142 110
__ __ _
379 2,085 110
__ __ _
Total liabilities 8,121 14,173 8,397
Net assets 15,914 25,090 15,605
Equity
Share capital 8,443 8,443 8,443
Share premium reserve 22,013 22,013 22,013
Revaluation reserve - - -
Share based payment reserve 2 2 2
Translation reserve (24) 5 (11)
Retained earnings (14,520) (5,373) (14,842)
__ __ _
Equity attributable to
equity holders of the
parent 15,914 25,090 15,605
Consolidated Interim Statement of Changes in Equity
For the six months ended September 2010
Share
Based Total
Share Share Revaluation Payment Translation Other Retained
Capital Premium Reserve Reserve Reserve Reserves Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April
2009 8,443 22,013 125 22 2 129 (2,732) 27,853
Loss for the
period - - - - - - (2,766) (2,766)
Other
comprehensive
income - - - - 3 3 - 3
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Total
comprehensive
income - - - - 3 3 (2,766) (2,763)
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Property
disposal - - (125) - - (125) 125 -
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
At September
2009 8,443 22,013 - 2 5 7 (5,373) 25,090
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Loss for the
period - - - - - - (9,469) (9,469)
Other
comprehensive
income - - - - (16) (16) - (16)
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Total
Comprehensive
income - - - - (16) (16) (9,469) (9,485)
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
At 31 March
2010 8,443 22,013 - 2 (11) (9) (14,842) 15,605
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Profit for
period - - - - - - 322 322
Other
comprehensive
income - - - - (13) (13) - (13)
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Total
Comprehensive
income - - - - (13) (13) 322 309
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
At 30
September
2010 8,443 22,013 - 2 (24) (22) (14,520) 15,914
--------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Consolidated Interim Cash Flow Statement
For the six months ended 30 September 2010
Unaudited Unaudited Audited
Six months Six months Year ended
to 30 September to 30 September 31 March
2010 2009 2010
GBP'000 GBP'000 GBP'000
Net cash from operating
activities (Note 6) 399 (1,912) (1,662)
__ __ _
Investing activities
Purchase of property,
plant and equipment (18) (88) (199)
Disposal of property,
plant and equipment 8 100 100
Long term deposit (151) - -
Purchase of intangible
assets (8) (49) (142)
Disposal of intangible
assets - - 3,034
Proceeds from disposal of
investment property - 125 125
__ __ _
Net cash used in
investing activities (169) 88 2,918
__ __ _
Financing activities
Proceeds from bank loans 560 - -
Repayment of bank loans (79) (309) (2,503)
Repayment of interest
swap (28) (31) (85)
Capital element of
finance lease rental
payments (38) (33) (65)
__ __ _
Net cash from financing
activities 415 (373) (2,653)
__ __ _
Net increase/(decrease)
in cash and cash
equivalents 645 (2,197) (1,397)
Net Foreign Exchange
Difference (13) (3) (12)
__ __ _
632 (2,200) (1,409)
__ __ _
Cash and cash equivalents
at the beginning of the
period (2,700) (1,291) (1,291)
__ __ _
Cash and cash equivalents
at the end of the
period (2,068) (3,491) (2,700)
Cash and cash equivalents are described more fully in Note
8.
Notes to the financial statements
For the six months ended 30 September 2010
1. General information
The interim report was formally approved by the Board of
Directors on 22 December 2010. The financial information set out in
this document does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The financial information in
respect of the periods ended 30 September 2010 and 2009 is
unaudited but has been reviewed by the Company's auditors, Ernst
& Young LLP. Their report is attached at the end of these
interim statements. The audit report for the year ended 31 March
2010 was unqualified but included an emphasis of matter for the
going concern assumption.
The financial information comprises the unaudited interim
results for the six months ended 30 September 2009 and 30 September
2009, together with the audited results for the year ended 31 March
2010. The financial information has been prepared using accounting
policies followed in the preparation of the Group's annual
financial statements for the year ended 31 March 2010, except for
the adoption of the new standards and interpretations which are
mandatory for periods beginning on or after 1 January 2009:
-- IFRS 2 Shared based payments - Vesting and Conditions and
Cancellations
The standard has been amended to clarify the definition of
vesting conditions and to prescribe the accounting treatment of an
award that is effectively cancelled because a non-vesting condition
is not satisfied. The adoption of this amendment did not have any
impact on the financial position or performance of the Group.
-- IFRS 8 Operating Segments
This standard requires disclosure of information about the
Group's operating segments and replaces the requirement to
determine primary (business) and secondary (geographical) reporting
segments of the Group. Adoption of this standard did not have any
effect on the financial position or performance of the Group. The
Group determined that the operating segments were the same as the
business segments previously identified under IAS 14 Segment
Reporting. Additional disclosures about each of these segments are
shown in Note 3, including comparative information.
-- IAS 1 Revised Presentation of Financial Statements
The revised standard separates owner and non-owner changes in
equity. The statement of changes in equity includes only details of
transactions with owners, with non-owners changes in equity
presented as a single line. In addition, the standard introduces
the statement of comprehensive income: it presents all items of
recognised income and expense, either in one single statement, or
in two linked statements. The Group has elected to present two
statements.
-- IAS 23 Borrowing Costs
The revised lAS 23 requires capitalisation of borrowing costs
that are directly attributable to the acquisition, construction or
production of a qualifying asset. The Group's previous policy was
to expense borrowing costs as they were incurred. In accordance
with the transitional provisions of the amended lAS 23, the Group
has adopted the standard on a prospective basis. Therefore,
borrowing costs are capitalised on qualifying assets with a
commencement date on or after 1 January 2009. During the 12 months
to 31 December 2009 no borrowing costs were incurred on qualifying
assets.
-- IAS 32 Financial Instruments: Presentation and lAS 1 Puttable
Financial Instruments and Obligations Arising on Liquidation
The standards have been amended to allow a limited scope
exception for puttable financial instruments to be classified as
equity if they fulfil a number of specified criteria.
The adoption of these standards did not affect the Group results
of operations or financial position in the six months ended 30
September 2010.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's annual financial statements for the year ended 31 March
2010 which have been filed with the Registrar of Companies. The
financial statements are presented in sterling and all values are
rounded to the nearest thousand pounds (GBP000) except when
otherwise indicated.
Notes to the financial statements
For the six months ended 30 September 2010
1. General information (continued)
Prior year reclassification
In the prior year accounts, sales discounts and free stock given
to customers were included within selling and distribution costs.
In the current year, the directors have reclassified the above
treatment as follows:
- reduced price and retrospective discounts have been deducted
from turnover
- free stock has been included in cost of sales.
This is considered by the directors to be a more appropriate
classification of these items and has no impact on the operating
loss for the period of six months to September 2010.
Previously
stated Reclassification Restated
2009 2009 2009
GBP'000 GBP'000 GBP'000
Revenue 16,743 (722) 16,021
Cost of sales (11,594) (87) (11,681)
Gross profit 5,149 (809) 4,340
Selling and distribution
costs (3,512) 809 (2,703)
2. Material uncertainty relating to going concern
On 26 February 2009 the Company reached an agreement with its
lending bank to restructure its banking facilities and secured the
lending bank's long term support. The Company's banking facilities
were restructured as follows:
- GBP2.6m term loan bearing an interest rate of LIBOR plus 3.75%
repayable in quarterly instalments commencing June 2009 through to
March 2013.
- Up to GBP4m invoice discount facility based on the Company's
trade receivables position bearing an interest rate of base plus
3.25%
- GBP0.1m overdraft facility.
During the year ended March 2010 the Company worked closely with
its lending bank and agreed to continue to reduce its bank debt
through the disposal of non-core assets. During the last quarter of
the year ended March 2010 the Company disposed of various non-core
assets for a total of GBP3m of which GBP2.6m were used to reduce
the Company's long term loan and convert the residual term loan in
total of GBP0.5m to an overdraft facility in February 2010.
On 9 April 2010 the Company agreed a three year financing
agreement with KBC Business Capital, the asset based lending
division of KBC Bank N.V. ("KBC"). The Company's existing debt
facilities were replaced by long term asset based facilities with
KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the Company's
eligible trade receivable position bearing an interest rate of base
plus 2%
- Up to GBP1.25m stock facility based on the Company's eligible
stock position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal
monthly payments commencing in May 2010 bearing an interest rate of
base plus 3%
As part of the above debt restructure the Company agreed various
operational and financial covenants measured on a monthly basis in
line with the Company's forecast provided to KBC.
Notes to the financial statements
For the six months ended 30 September 2010
2. Material uncertainty relating to going concern
(continued)
As more fully disclosed in the Chairman's statement, changes
were made to the board during September and October 2010. In
recognition of this, the directors have agreed a comprehensive
transition plan for the period up to the Company's AGM. The
directors do not consider that this significantly increases the
risk around the successful delivery of the turnaround plan.
The directors have also prepared forecasts for the business for
the period to 31 March 2012 on the basis of this long term
agreement with the Company's bank KBC. These forecasts reflect the
Company's best estimates concerning the impact of the following on
its ability to meet its banking covenants:
-- current economic downturn
-- the Company's exposure to different sales channels across the
business
-- the Company's ability to meet its sales forecast and
operating margin notwithstanding the Pharmaceutical Division
recovery plan, and required headroom and cash generation
-- The Pharmaceutical division customer concentration combined
with estimated future changes in the coming year
-- the Company's ability to achieve the planned supply chain
savings
The directors have identified and considered whether the Company
will be able to achieve its plan for the year and banking covenants
as agreed with its lending bank under various scenarios. In
anticipation of challenging market conditions in the four months
period to 31 March 2011 focused mainly at the consumer health
division, the Company's lending bank agreed to waive its monthly
financial covenants for the period December 2010 to 31 March 2011
subject to reducing by GBP100,000 the Company's headroom during the
waiver period. The directors have also considered the performance
of the pharmaceutical division and its performance to date and for
the rest of the forecast period, the underlying sales assumptions
required to meet the consumer health division's sales targets post
brand disposals in the current difficult retail economic climate,
and the uncertainty of achieving the sales targets in time to meet
the turnaround plan and, as a result, its banking covenants. In the
event that the Company is not able to materially achieve its
forecast the Company will not be able to meet the covenants agreed
with its lending bank.
The above factors give rise to a material uncertainty which may
cast significant doubt upon the ability of the Company to meet its
banking covenants and continue as a going concern.
Having carefully considered these uncertainties the directors
are satisfied that the cash flow forecasts have been properly
prepared and demonstrate that the Company can meet its liabilities
as they fall due in line with the agreed debt structure for the
foreseeable future. On this basis they believe that it is
appropriate to prepare the financial statements on a going concern
basis. The financial statements do not include any adjustments to
the balance sheet intangible or tangible fixed assets, the
reclassification of long term liabilities or provision for further
liabilities.
3. Segmental information
For management purposes the Group is currently organized into
three operating divisions and a corporate head office. The three
operating divisions are:
Consumer Health Sale of consumer branded health products.
Pharmaceutical Manufacture of the Group's own Medicines and
Healthcare products Regulatory Agency ('MHRA')
licensed products and pharmaceutical and over-the-counter
products for third parties.
Natural Products Manufacture of botanical extracts used as ingredients
by the Pharmaceutical division and sold to third
parties. Such extracts are used both as active
pharmaceutical ingredients and as nutraceuticals.
Management monitors the operating results of its operating
divisions separately for the purpose of making decisions about
performance assessment. Segment performance is evaluated based on
operating profit or loss which in certain respects is measured
differently from operating profit or loss in the consolidated
statements. Group financing (including finance costs and finance
revenue) and income taxes are managed on a Group basis and are not
allocated to operating segments.
Notes to the financial statements
For the six months ended 30 September 2010
3. Segmental information (continued)
Unaudited Six Adjustment
months to Consumer Natural and
September health Pharmaceutical products eliminations Consolidated
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Sales to
external
Customer 7,073 4,142 1,879 13,094
Inter-segment
sales 10 321 325 (656) -
Segment
revenue 7,083 4,463 2,204 (656) 13,094
Operating
results
Segment
results 1,508 13 405 - 1,926
Unallocated
expenses (1,503)
Group
operating
profit 423
Net finance
costs (61)
Profit before
taxation 362
Tax charge (40)
Profit for the
six months 322
Assets and
liabilities
Segment assets 16,118 2,785 4,206 - 23,109
Unallocated
assets 926
Total assets 24,035
Segment
liabilities 1,959 1,526 497 3,982
Unallocated
liabilities 4,139
8,121
Other segment
information
Capital
expenditure:
Property,
plant and
equipment - 18 - 18
Intangible
assets 8 - - 8
Depreciation
and
amortisation 22 219 133 3 377
Write-off of
inventories 23 158 13 - 194
Notes to the financial statements
For the six months ended 30 September 2010
3. Segmental information (continued)
Unaudited Six Adjustment
months to Consumer Natural and
September 2009 health Pharmaceutical products eliminations Consolidated
(Restated) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Sales to
external
Customer 9,954 4,371 1,697 - 16,022
Inter-segment
sales - 295 235 (530) -
Segment
revenue 9,954 4,666 1,932 (530) 16,022
Operating
results
Segment
results (1,152) (164) (30) - (1,346)
Unallocated
expenses (1,343)
Group
operating
loss (2,689)
Net finance
costs (123)
Loss before
taxation (2,812)
Tax credit 46
Loss for the
six months (2,766)
Assets and
liabilities
Segment assets 30,760 4,329 3,556 - 38,645
Unallocated
assets 618
Total assets 39,263
Segment
liabilities 3,771 665 1,522 - 5,958
Unallocated
liabilities 8,215
Total
liabilities 14,173
Other segment
information
Capital
expenditure:
Property,
plant and
equipment - 88 - - 88
Intangible
assets 49 - - - 49
Depreciation
and
amortisation 34 232 137 28 431
Intangibles
assets
Amortisation 3 - - - 3
Impairment
loss
recognised in
profit and
loss 2,477 - - - 2,477
Write-off of
inventories 45 - - - 45
Notes to the financial statements
For the six months ended 30 September 2010
3. Segmental information (continued)
Adjustment
Audited Consumer Natural and
Year ended health Pharmaceutical products eliminations Consolidated
31 March 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Sales to
external
Customer 17,700 8,826 3,705 - 30,231
Inter-segment
sales - 489 340 (829) -
Segment
revenue 17,700 9,315 4,045 (829) 30,231
Operating
results
Segment
results (7,961) (1,868) 464 - (9,365)
Unallocated
expenses (2,801)
Group
operating
loss (12,166)
Net finance
costs (385)
Loss before
taxation (12,551)
Tax credit 316
Loss for the
year (12,235)
Assets and
liabilities
Segment assets 17,632 3,050 3,223 - 23,905
Unallocated
assets 97
Total assets 24,002
Segment
liabilities 2,818 1,142 429 - 4,389
Unallocated
liabilities 4,008
8,397
Other segment
information
Capital
expenditure:
Property,
plant and
equipment 9 184 6 - 199
Intangible
assets 142 - - - 142
Depreciation
and
amortisation 73 1,907 270 37 2,287
Write-off of
inventories - 441 31 169 641
Impairment
loss
recognised in
profit or
loss 11,578 - - - 11,578
Notes to the financial statements
For the six months ending 30 September 2010 3. Segmental
information (continued)
Unaudited
Unaudited Six months
Six months to September
to September 2009 Audited Year
2010 (Restated) ended 2010
Geographical segment GBP'000 GBP'000 GBP'000
Revenue
United Kingdom 9,282 11,582 21,460
Europe, excluding United
Kingdom 1,194 2,161 4,380
Asia and Middle East 2,224 1,661 3,189
Africa 303 276 559
Australia 91 80 291
The Americas - 261 352
Group revenue 13,094 16,021 30,231
The revenue information above is based on the location of the
customer and is not seasonal.
Unaudited Unaudited Audited Year
At September At September ended 31
2010 2009 March 2010
GBP'000 GBP'000 GBP'000
Non-current assets
United Kingdom 13,818 25,563 14,016
Europe excluding United
Kingdom - 7 10
Group non-current assets 13,818 25,570 14,026
The Group does not actively manage its business on a
geographical basis and accordingly does not analyse operating
profit on that basis.
Notes to the financial statements
For the six months ended 30 September 2010
4. Exceptional Items
The Group has incurred exceptional costs in the period
associated with the fundamental restructuring of the business.
The Group presents as exceptional items on the face of the
income statement, those material items of income and expense which,
because of the nature and expected infrequency of the events giving
rise to them, merit separate presentation to allow shareholders to
understand better the elements of financial performance in the
year, to facilitate comparison with prior periods and a better
understanding of trends in financial performance.
These costs are analysed as follows:
Unaudited Unaudited
Six months Six months
to September to September Audited year
2010 2009 ended 2010
GBP'000 GBP'000 GBP'000
Recognised in loss
attributable to equity holders
of the parent:
Goodwill impairment - 2,477 11,578
Corporate and other
restructuring 311 245 818
Gain on disposal of intangible
asset - - (2,244)
Net loss on disposal of
Italian subsidiary 20 - -
Impairment of property, plant
and equipment - - 1,438
Product recall - - 116
Finance costs - - 102
Tax impact of exceptional
items - - (332)
331 2,722 11,476
Goodwill impairment
After carefully estimating the carrying value of the goodwill at
the balance sheet date, the book value was identified as being
impaired during the year ended 31 March 2010. Consequently the book
value of the goodwill was reduced by GBP11.6m for the year ended
March 2010.
Corporate and other restructuring
As part of the fundamental restructuring of the business, costs
have been incurred in restructuring the Board, terminating a
premises lease, providing of interim management resource and in
recruiting the new management team.
Gain on disposal of intangible assets
During the year ended March 2010, the Company disposed of a
number of non-core products for a total of GBP3m realising a gain
on disposal of GBP2.2m.
Impairment of property, plant and equipment
After carefully estimating the carrying value of the property
plant and equipment at the balance sheet date, the book value was
identified as being impaired. Consequently the book value of the
property, plant and equipment was reduced by GBP1.4m in the year
ended March 2010 to reflect the carrying value as at 31 March
2010.
Finance costs
Finance costs in relation to the restructuring of the Company
and its financing in the year ended March 2010.
Notes to the financial statements
For the six months ended 30 September 2010
4. Exceptional Items (continued)
Product recall
During the year ended March 2010 the Company incurred costs due
to a recall of a licensed product including a contaminated
ingredient supplied to the Company. The provision reflects the
estimated future costs following the product recall.
Disposal of Optima Italy S.r.l
On 12 July 2010 the Company's subsidiary Optima Italia S.r.l
("OIS") entered into an agreement to sell certain business assets
and liabilities to Optima Naturals S.r.l ("ONS"), a new Company to
be formed by the current manager of OIS, and appoint ONS as the
distributor of a range of the Company's products in Italy and other
territories.
The Company will receive total cash consideration of GBP45,000
for these assets which have a book value of approximately GBP6,000.
OIS generated annual sales of approximately GBP1.3m and achieved an
operating profit of approximately GBP70,000 for the year ended 31
March 2010.
5. Earning/(loss) per share
The calculation of earnings/(loss) per share is based on the
profit/(loss) on ordinary activities after taxation and the
weighted average number of ordinary shares of the Company.
Unaudited Unaudited
Six months Six months
to September to September Audited Year
2010 2009 ended 2010
No. No. No.
Weighted average number of
shares:
For basic earnings per share 84,410,207 84,410,207 84,410,207
Outstanding share options - - -
For diluted earnings per share 84,410,207 84,410,207 84,410,207
GBP'000 GBP'000 GBP'000
Profit/(loss) attributable to
shareholders 322 (2,766) (759)
Exceptional items 331 2,722 (11,476)
Adjusted profit/(loss) 653 (44) (12,235)
P P P
Profit (loss) per share
Basic profit (loss) per share 0.38 (3.27) (14.49)
Diluted profit (loss) per
share 0.38 (3.27) (14.49)
Adjusted earnings/(loss) per
share
Basic profit (loss) per share 0.77 (0.05) (0.90)
Diluted profit (loss)loss per
share 0.77 (0.05) (0.90)
The above table shows overall profit per share and the profit
per share adjusted to exclude the impact of exceptional costs.
Notes to the financial statements
For the six months ended 30 September 2010
6. Analysis of cash flow
Six months Six months Year ended
to 30 September to 30 September 31 March
2010 2009 2010
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Profit (loss) for the
period 322 (2,766) (12,235)
Adjustments for:
Depreciation on property,
plant and equipment 374 431 838
Gain on disposal of
intangible assets - - (2,244)
Amortisation of intangible
assets 3 3 11
Impairment of goodwill and
intangible asset - 2,477 11,578
Increase/(decrease) in
provisions 84 (551) (511)
Impairment of investment
property, plant and
equipment - - 1,438
Taxation Expense/(income) 40 (46) (317)
Net finance costs 61 124 284
Operating cash flows
before movements in
working capital 884 (328) (1,158)
Decrease/ (increase) in
inventories 118 (258) 1,250
Decrease / (increase) in
receivables 277 (1,862) (173)
(Decrease)/ increase in
payables (825) 660 (1,296)
Net movement in working
capital (430) (1,460) (219)
Cash (consumed) /
generated by operations 454 (1,788) (1,377)
Income tax paid - (8) (7)
Interest paid (46) (104) (263)
Interest element of
finance lease rental
payments (9) (12) (15)
Interest received - - -
Net cash from operating
activities 399 (1,912) (1,662)
Notes to the financial statements
For the six months ended 30 September 2010
7. Intangible assets
Patents and licences consist of intangible assets acquired
through business combinations. These assets have indefinite useful
lives, as they relate to the Group's marketed brands. Licences have
been granted for a minimum of 10 years with the option of renewal
based on whether the Group meets performance targets during the
initial term. Because similar licences have been successfully
renewed in the past, the Group has concluded that these assets have
an indefinite useful life.
After carefully estimating the carrying value of goodwill at the
balance sheet date, the financial assumptions
used and the present value of the cash generating unit the book
value of goodwill was identified as representing the carrying value
of goodwill as at the balance sheet date. The directors have
re-evaluated the financial assumptions used and the present value
of the cash flow of the cash generating unit.
With effect from 1 April 2006, the date of transition to IFRS,
goodwill was no longer amortised but is now subject to annual
impairment testing. Value in use is calculated as the net present
value of the projected risk-adjusted cash flows of the cash
generating unit to which goodwill is allocated. The cash flow
projections are based on business plans approved by management for
the first year and a projection which covers a period of 15 years.
The discount rate applied may vary depending on the risk profile of
the asset being valued but is 15% (2010: 15%) which is the Group's
average pre-tax discount rate derived from a capital asset pricing
model.
The directors are of the view that the impairment should be
based on a 15 year forecast (2010: 15 years). The directors
consider a 15 year period is appropriate due to the indefinite
useful life of some of the assets and the forecasted performance of
the consumer healthcare division's healthcare brands.
The key assumptions for the value in use calculations are those
regarding the launch dates of products employing
these technologies, their long term growth rates, the discount
rate used and the period over which the cash flows
are projected. The assumptions made reflect past experience,
market research and expectations of future market
trends.
Impairment of goodwill and intangibles with indefinite lives
Goodwill acquired through business combinations and patents and
licenses have been allocated for impairment
testing purposes to the consumer health cash generating unit,
which is also a reportable segment. This represents
the lowest level in the Group at which goodwill is monitored for
internal management purposes.
The recoverable amount of the consumer health cash generating
unit has been determined based on a value in use calculation using
cash flow projections over a period of 15 years based on financial
forecasts approved by the Board for the year ending March 2011. The
discount rate applied to cash flow projections is 15% (2010: 15%)
and cash flows beyond the one year forecast are extrapolated using
a growth rate from 3%-5% in the first 4 years and 1% thereafter
(2010: 3%-4% to 1%).
a. Key assumptions used in value in use calculations
The calculation of value in use for the consumer health cash
generating unit is most sensitive to the following assumptions:
-- Gross margin
-- Discount rates
-- Growth rate used to extrapolate cash flows beyond the
forecast period.
Gross margins are based on average values achieved in the two
years preceding the start of the budget period. These are increased
during the long term forecast period as a result of efficiencies
achieved during the forecast period.
Notes to the financial statements
For the six months ended 30 September 2010
7. Intangible assets (continued)
Discount rates reflect management's estimate of the Group's
average pre-tax discount rate derived from a capital asset pricing
model adjusted to current market conditions.
Growth rate estimates are based on published industry research
and management expectation that the consumer healthcare division
will increase its market share within the natural health care
market as a result of increased penetration with its existing and
new customers.
b. Sensitivity to changes in assumptions
There are reasonable possible changes in key assumptions which
could cause the carrying value of the unit to exceed its
recoverable amount. These are discussed below.
-- Gross margin assumptions - a reduction of 1% in projected
gross margin during the forecast period would
result in a further impairment charge of GBP0.7m.
-- Discount rates - an increase of 1% in the assumed discount
rate during the projections period would result
in a further impairment charge of GBP0.7m.
-- Growth rate assumptions - a reduction of 1% in the forecasted
growth rate during the projection period
will result in a further impairment charge of GBP1.4m.
8. Cash and short-term deposits
For the purpose of the consolidated cash flow statement, cash
and cash equivalents comprise the following:
Year ended
At 30 September At September 31 March
2010 2009 2010
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Cash at bank and in hand 688 572 52
Bank overdraft and invoice
discount facility (2,756) (4,063) (2,752)
(2,068) (3,491) (2,700)
Notes to the financial statements
For the six months ended 30 September 2010
9. Financial Liabilities
Year ended
At 30 September At 30 September 31 March
2010 2009 2010
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
Current:
Bank overdraft - 207 186
Invoice discount facility 2,757 3,856 2,566
Current obligations under
finance leases and hire
purchase contracts 49 66 67
Interest rate swap - 82 28
Current instalments due on
bank loans 192 525 -
2,998 4,736 2,847
Non-Current:
Non-current obligations
under finance leases and
hire purchase contracts 90 142 110
Non-current instalments due
on bank loans 289 1,669 -
379 1,811 110
Bank loans:
Bank Loan 481 2,194 -
The bank overdraft is secured by a floating charge over the
Group's assets.
On 26 February 2009 the Group restructured its UK banking
facilities and replaced the majority of its overdraft with an
invoice discount facility based on the Company's outstanding trade
receivables. The UK facility was secured by a fix charge over the
Company's trade receivables and interest was charged at 3.25% above
base rate.
The term loan is repayable by instalments with the final payment
falling due on 31 March 2013. Interest is charged at 3.75% above 3
month LIBOR.
During the year ended March 2010 the Company worked closely with
its lending bank and agreed to continue to reduce its bank debt
through the disposal of non-core assets. During the last quarter of
the year ended March 2010 the Company disposed of various non-core
assets for a total of GBP3m of which GBP2.6m were used to reduce
the Company's long term loan and convert the residual term loan in
total of GBP0.5m to an overdraft facility in February 2010. The
overdraft facility was repaid in April 2010 as part of the above
mentioned financing agreement with KBC Business Capital.
In June 2007 the Group entered into a GBP2,000,000 LIBOR
interest swap bearing 6.19% fixed rate to hedge the Group interest
rate exposure against its term loan expiring in June 2010. As at 31
March 2010 the Group provided GBP28,000 (2009: GBP113,000) for the
interest swap liability which was fully repaid in April 2010.
Notes to the financial statements
For the six months ended 30 September 2010
9. Financial Liabilities (continued)
On 9 April 2010 the Company agreed a three year financing
agreement with KBC Business Capital, the asset based lending
division of KBC Bank N.V. ("KBC"). The Company's existing debt
facilities were replaced by long term asset based facilities with
KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the Company's
eligible trade receivable position bearing an interest rate of base
plus 2%
- Up to GBP1.25m stock facility based on the Company's eligible
stock position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal
monthly payments commencing in May 2010 bearing an interest rate of
base plus 3%
As part of the above debt restructure the Company agreed various
operational and financial covenants measured on a monthly basis in
line with the Company's forecast provided to KBC.
The bank term loan was secured by a cross debenture and
guarantee between the Company, Health Perception (UK) Limited,
Optima Healthcare Limited and Optima Health (Ireland) Limited and
by a debenture granting fixed and floating security over all assets
of the Company and selected trademarks as agreed with the Company's
lending bank.
INDEPENDENT REVIEW REPORT TO WILLIAM RANSOM & SON PLC
Introduction
We have been engaged by the Group to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 September 2010 which comprises the Consolidated
Interim Income Statement, Consolidated Interim Statement of
Comprehensive Income Consolidated Interim Balance Sheet,
Consolidated Interim Statements of Changes in Equity, Consolidated
Interim Cash Flow Statement and the related notes 1-9. We have read
the other information contained in the half yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the Interim Report in accordance with the AIM Rules
issued by the London Stock Exchange which require that it is
presented and prepared in a form consistent with that which will be
adopted in the Company's annual accounts having regard to the
accounting standards applicable to such annual accounts.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with the AIM rules issued by
the London Stock Exchange.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2010 is not prepared, in all material respects, in
accordance with the accounting policies outlined in Note 1, which
comply with International Financial Reporting Standards as adopted
by the European Union and in accordance with the AIM rules issued
by the London Stock Exchange.
Emphasis of matter - going concern
In forming our conclusion on the financial statements, which is
not qualified, we have considered the adequacy of the disclosures
made in note 2 in the Interim Report concerning the Company's
ability to continue as a going concern. These conditions indicate
the existence of a material uncertainty which may cast significant
doubt about the ability to continue as a going concern. The Interim
Report does not include the adjustment that would result if the
Company was unable to continue as a going concern.
Ernst & Young LLP
Luton
22 December 2010
This information is provided by RNS
The company news service from the London Stock Exchange
END
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